Stock analysts look for guidance to coming quarters

S&P finds health care is bright spot in otherwise bleak first quarter

By

KateGibson

NEW YORK (MarketWatch) -- With first-quarter results at hand, Standard & Poor's estimates the health care sector will realize a small gain from a year ago, while stock analysts are eyeing corporate guidance as they start to adjust expectations for the rest of the year.

It will take about a month before analysts have enough of the S&P projected earnings guidance to reconfigure earnings expectations for the second quarter, said Marc Pado, U.S. market strategist at Cantor Fitzgerald.

"No one is looking for growth in the second quarter," said Pado, who points to current consensus projections calling for gross domestic production to fall by 2.3% during the period.

"It is the third quarter that is up in the air. The consensus has actually swung from a median of minus 0.5% to plus 0.5%," said Pado.

Health care will contribute nearly 22% of earnings in the first quarter, with a small year-over-year gain of 3.9%, estimates S&P senior index analyst Howard Silverblatt.

"It's all relative," said Silverblatt, who notes the sector stands alone in posting positive earnings-per-share gains each quarter since the market highs.

The consumer staples sector is expected to post slightly lower earnings-per-share, yet the sector continues to pay and increase dividends, and now accounts for the largest share, or 16.5%, of dividends. Financials, which used to account for more than 30% of dividends, now make up 10.5% of the investor payouts, according to Silverblatt.

On Wednesday, stocks turned tail on earlier losses to post modest gains after a two-day decline, with consumer discretionary pacing the rise. The Dow Jones Industrial Average
DJIA, +0.72%
stood at 7,837.11, up 47.55 points, or 0.6%. The S&P 500 Index
SPX, +0.59%
added 9.61 points, or 1.2%, to 825.16, while the Nasdaq Composite
COMP, +0.50%
rose 29.05 points, or 1.9%, to 1,590.66.

After Tuesday's close, Alcoa Inc.
AA, +2.36%
kicked off the earnings season with a first-quarter net loss that proved worse than expected. However, analysts said the troubled aluminum producer appears stronger after aggressively cutting costs. Read more on Alcoa.

"With Alcoa's numbers in the bag and Wal-Mart [Stores Inc.]
WMT, -0.37%
some five weeks away, we are gearing up for what may be the most important earnings season of the decade. Corporate managers have to show some confidence that the worst is past, or at least that the worst is here and now," said Nicholas Colas, chief market strategist, BNY ConvergEx Group.

Beyond moves to shore up its bottom line, Alcoa sees "both near-term and long-term catalyst that should improve the prospects for the aluminum industry," said Pado.

"The current market is just transitioning from a shorter-term outlook of continued economic weakness, looking at what quarter two will bring, to a period of break-even stability in quarter three. Therefore, our expectation is to mirror that by looking for stabilization of the market in a range that will support the 'expectation' of growth in quarter four," Pado added.

Intraday Data provided by SIX Financial Information and subject to terms of use.
Historical and current end-of-day data provided by SIX Financial Information. Intraday data
delayed per exchange requirements. S&P/Dow Jones Indices (SM) from Dow Jones & Company, Inc.
All quotes are in local exchange time. Real time last sale data provided by NASDAQ. More
information on NASDAQ traded symbols and their current financial status. Intraday
data delayed 15 minutes for Nasdaq, and 20 minutes for other exchanges. S&P/Dow Jones Indices (SM)
from Dow Jones & Company, Inc. SEHK intraday data is provided by SIX Financial Information and is
at least 60-minutes delayed. All quotes are in local exchange time.